One of the biggest mistakes landlords make is pricing their rental too high. Many turn to Zillow for a quick estimate or set the price based on their mortgage payment, but neither of these methods accurately reflect the current rental market.
Overpricing A Rental Does Two Things:
It increases days on market which leads to the “stale-bread effect”. Prospective tenants see the property has been listed for 30+ days and assume something must be wrong with it. As interest in the property decreases, the price must also decrease in order to bring the interest back up.
It attracts low quality/desperate tenants. After all, high quality tenants don’t overpay as that is what makes them high quality (good FICO score, debt to income ratio, responsible with their finances, etc). A property that is priced too high attracts a tenant who is desperate. They don’t care that they are overpaying because they may have already been rejected by two or three other landlords.
It’s All About The Numbers
Most landlords are only focused on maximizing their monthly rent. We encourage them to focus on maximizing their annual rent instead. Let’s look at a case study:
One landlord lists their rental at $2,500 and finds a tenant in two weeks.
Another landlord lists an identical property at $2,700, but it sits vacant for eight weeks before they find a tenant.
By the end of the year, the first landlord earns $1,750 more than the one who priced their property too high, even though the first landlord got more rent per month. The second landlord also has a higher chance of attracting that desperate tenant who is willing to overpay.
